Bayesian analysis of the two-part model with endogeneity: application to health care expenditure

Murat Munkin, Partha Deb and Pravin Trivedi

Journal of Applied Econometrics, 2006, vol. 21, issue 7, 1081-1099

Abstract: This paper studies the effect of managed care on medical expenditure using a model in which the insurance status is assumed to be endogenous. Insurance plan choice is modeled through the multinomial probit model. The medical expenditure variable, the outcome of interest, has a significant proportion of zeros that are handled using the two-part model, extended to handle endogenous insurance. The estimation approach is Bayesian, based on the Gibbs Sampler. The model is applied to a sample of 20 460 individuals obtained from the Medical Expenditure Panel Survey. The results provide substantial evidence of selectivity. Copyright © 2006 John Wiley & Sons, Ltd.

Date: 2006
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DOI: 10.1002/jae.891

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